Free trade's many broken promises

By David Crane, in the Toronto Star, 15 January 1998

THERE WAS was not a peep out of Ottawa on
Jan. 1, despite the fact that the date
marked a significant event in Canadian
history - the final elimination of tariffs
on goods between Canada and the United
States under the Canada-U.S. free trade
agreement.

It was on Jan. 1, 1989 that the free trade
deal came into effect.

Based on the great claims that government
and business proponents of the trade deal
had made, you would have thought that the
Business Council on National Issues, the
Canadian Chamber of Commerce, the Alliance
of Canadian Manufacturers and Exporters,
the C.D. Howe Institute, not to mention
negotiators Simon Reisman and Gordon
Ritchie, would have planned a gala event
to celebrate on Jan. 1.

But nothing of the sort happened.

In the United States, Commerce Secretary
William Daley issued a statement,
declaring that "a milestone in the trade
policy history of the United States and
Canada was reached on Jan. 1, 1998."

But from the Canadian point of view, maybe
there's not a lot to celebrate.

To be sure, Canadian exports to the United
States have soared. But it's likely that
would have happened anyway due to the
strength of the U.S. economy.

Much of the increase in trade volumes to
the United States have occurred in sectors
such as automobiles and resources, where
tariffs were already zero.

But what the Mulroney government, the
business community, economists and think
tanks promised for the most part never
materialized.

Then prime minister Brian Mulroney
proclaimed that the trade deal would mean
"jobs, jobs, jobs." Reisman predicted
that the free trade deal would pave the
way for bigger pay increases for Canadian
workers.

Groups like the business council and the
Alliance of Canadian Manufacturers and
Exporters said the deal would mean richer
social programs. The C.D. Howe Institute
said it would mean the end of bitter
disputes such as the softwood lumber
dispute.

The Economic Council of Canada said it
would mean a huge surge in Canadian
productivity. The government boasted it
had won an exemption for Canadian cultural
policies.

A decade later, Canadians are still
waiting for "jobs, jobs, jobs" and for
those big pay increases. And Canadian
families are still waiting for richer
social programs and rising living
standards based on the promised upsurge in
productivity.

And as for the promised end to
cross-border trade disputes and the
exemption of cultural industries from
trade measures, the record speaks for
itself.

Major industries, such as steel, softwood
lumber and wheat, have been forced under
U.S. threats to agree to managed trade
provisions that limited their shipments to
the United States. While Mulroney had
promised he would not sign a trade deal
unless Canada was exempted from U.S. trade
harassment, in the end he caved in.

And Canada's cultural industries have
continued to face the full assault of the
giant U.S. media conglomerates and the
White House and Congress.

The only goal of the free trade agreement
that has turned out as predicted is that
Canadian governments have fewer powers to
stand up for Canadian interests. As senior
federal negotiators made clear, one of the
key, though not widely broadcast goals of
the free trade agreement was to prevent
future elected Canadian governments from
pursuing certain pro-Canada policies.

Thus Canada gave up many of its powers to
prevent Americans from buying up promising
Canadian companies. Canada also conceded
greater access for the United States to
Canadian resources. And U.S. corporations
gained greater leverage in fighting
federal and provincial policies that might
affect them.

Meanwhile, as CIBC-Wood Gundy economists
Jeff Rubin and John Lester have shown,
"instead of narrowing, the labour
productivity gap in manufacturing has
continued to widen to an unprecedented 20
per cent. Free trade hasn't accelerated
the slide in relative productivity but it
hasn't halted it either."

Nor has the free trade agreement made
Canada a magnet for foreign investors to
serve the North American market.

Instead, the continuation of trade
harassment from Washington has made the
United States a safer location for
European and Japanese multinationals.

It's hard to see what Canada really gained
from the free trade deal. All we can say
with certainty is that 10 years later it
has not delivered the benefits its
proponents promised us.

David Crane is The Star's economics editor.

copyright 1996-1998, The Toronto Star

Bob Olsen Toronto bobolsen@arcos.org (:-)

For MAI-not subscription information, posting guidelines and
links to other MAI sites please see http://mai.flora.org/